Customer Satisfaction Score
CSAT Index is a shortened abbreviation of Customer Satisfaction Score – one of the key indicators used to assess user or customer satisfaction with their experience with a product or service. The level of customer satisfaction score directly influences retention, customer acquisition cost, and long-term loyalty to the company brand.
How to calculate CSAT?
The CSAT is calculated based on the data that is provided during customer surveys, answering the questions:
“How would you rate your overall satisfaction with the product or service you received?” A respondent is asked to use a scale from 1 to 5, where: ‘1’ – very dissatisfied and ‘5’ – very satisfied.
The Customer Satisfaction Score is calculated as a percentage, where 100% is maximum customer satisfaction, and 0% is minimum.
The CSAT score is calculated as the number of “5 – very satisfied” and “4 – satisfied” scores with the total number of scores.
(number of “5 – very satisfied” + “4 – satisfied”)/ total number of ratings x 100% = % CSAT.
In addition to the CSAT, we recommend using indicators such as:
- Loyalty Index NPS (Net Promoter Score) – an indicator that characterizes the level of customer loyalty to the brand, and the likelihood of providing a recommendation for interaction with the company
- Index of Customer Effort Score (CES) – an indicator that assesses the ease of achieving the client’s goal when using a product or ordering services.
Mistakes of CSAT measurement
Several common mistakes occur when evaluating and interpreting customer experience indexes (CSAT, NPS, and others).
Drawing conclusions on a small sample of respondents
For example, you have 10,000 customers among whom you conducted a survey. When asked, “How would you rate your overall satisfaction with the product or service you received?” you only have 200 responses, which is not enough for a qualitative assessment of the CSAT index. The accuracy of such an estimate would be no more than 85%, with a margin of error of >5%. For at least 95% confidence (“accuracy”) and a margin of error of 3%, you must have at least 956 responses.
To avoid this error, we suggest using a calculator for planning sociological studies.
Lack of customer segmentation
In our practice, we often meet companies that output a single CSAT or NPS for all clients when conducting research. But suppose you look at the estimates in terms of individual customer segments. In that case, it is very likely they will be different because the needs of each segment and the criteria of customer experience may be different.
A differentiated approach to research and evaluation will allow you not to miss changes in the overall perception of your experience by specific customer segments and react in time to deteriorating results.
The difference between CSAT and NPS
The Customer Satisfaction Score focuses on customer satisfaction from current interactions, while the Net Promoter Score focuses on long-term customer loyalty.
The CSAT allows you to evaluate each of the company’s service elements, such as “Are you satisfied with your visit to our store today?”
NPS answers a customer’s overall perception of their relationship experience with the business.
CSAT and DSAT (Dissatisfaction Score)
Companies mainly focus on determining customer satisfaction scores. Most formulas suggest only satisfaction scores for comparison, rejecting neutral scores and not concentrating on negative scores (NPS, CSAT, CSI, CES). Marketers know frustrated customers tend to share their experience stories, which affects company perceptions actively. The DSAT allows you to bring focus and track the dynamics of those who didn’t like the interaction experience.
Calculating the DSAT is similar to the CSAT or NPS. Only in the numerator do we estimate the amount of negative feedback from our customers. Ideally, the company should try to move “detractors” into brand promoters, but even moving into the neutral customer group will yield good results. Detractors are customers who are more likely to criticize, not recommend, or spread the word about their negative interaction experience. Promoters are customers who act as advocates for your brand, willingly spreading the word about the company’s products and services that shine a good light on them. They are loyal customers.
How to increase the Customer Satisfaction Score?
The first thing to note is the need to systematically measure the level of interaction between a company and its customers. Unfortunately, as our CX Research showed, many companies do not do it systematically and do not have a dedicated function that would deal with this issue.
The customer experience evaluation takes place on an emotional level, although rational factors such as price, distance, and physical properties of goods influence the overall result. Therefore, take care of the following factors:
- Invest in creating a digital user experience. Digitalization of customer interaction reduces bureaucracy and time spent on collecting metrics.
- Set up a channel for feedback from the user to the business. On the one hand, this will allow you to measure experience constantly. On the other, modern customer wants to share their thoughts “immediately.”
- Train your employees to take care of the client’s needs and instruct them how to react in situations when a customer is having “a bad experience.”
- Assure transparent pricing and a wide assortment.
- Provide personalization of communication and service offerings
- Do pleasant and unexpected little trinkets
It is not the complete list of factors, and for each business and customer segment, it should be formed individually.
Disadvantages of CSAT
The disadvantages of using the CSAT are that it focuses on current interactions and does not allow you to assess and predict future behavior. Also, dissatisfied customers participating in surveys can affect the accuracy of the index.
For a comprehensive assessment of customer experience and attitude towards your company, we recommend using a set of 5 key loyalty KPIs and taking advantage of your customer service audits and surveys.
Craft Innovations team can help measure your customers’ loyalty and satisfaction and develop a customized plan to increase your CSAT, NPS, and CES scores. Let’s talk.
Customer experience is one of the determining factors that influence the desire and decision of the latter to re-interact with the company or service. According to the PwC study ‘Future of Customer Experience Survey 2017/18’ – 64% of Europeans stated that their customer experience influences their decision to buy a product or service.
To determine the level of customer satisfaction from the interaction with the company, we use the following metrics:
- NPS – Net Promoter Score
- CSAT – Customer Satisfaction Score
- CES – Customer Effort Score
NPS – Net Promoter Score
This metric evaluates customer experience and predicts business growth by defining a client’s willingness to recommend a particular brand.
How is a Net Promoter Score calculated?
To calculate NPS, survey your customers with a single key question using a 0-10 rating scale: “How likely would you recommend [product/service] to a friend or colleague?”
NPS – an indicator that aims to assess brand loyalty’s long-term level, the perfect metric for benchmarking. The recommended frequency of research is from 4 to 2 times a year.
Interpretation of NPS results:
- Brand promoters (score 10-9) – these people are loyal and will keep buying and ready to refer your brand to others.
- Passives (score 8-7) – customers considered as satisfied but not excited and thus open to checking competitive offers;
- Detractors (score 6-1) – unsatisfied customers, people who are unhappy and might damage brand reputation by spreading their bad experience to others.
NPS formula and interpretations
NPS = (Number of promoters,%) – (Number of detractors,%)
CSAT – Customer Satisfaction Score
CSAT is a customer experience metric that determines the customer’s satisfaction and happiness with a product or service.
Typically such metric can be collected by sending a survey with a single question: “How satisfied were you with [product/service]?” Users respond with a 1-5 rating scale, where “1” is very dissatisfied, and “5” is very satisfied.
CSAT is an indicator that measures the current level of satisfaction. The best time to assess CSAT is to launch a survey immediately after a purchase or an interaction with the service.
CSAT formula and interpretations
CSAT = (number of ratings 5-4) / total number of ratings * 100%
CES – Customer Effort Score
CES – is a metric that measures how much effort a user puts into getting a result from a single interaction. And in fact, it evaluates a service touchpoint’s simplicity, speed, and intuitiveness.
The best moment to capture CES is to launch an ad-hoc survey question right after the interaction: “How easy was it to interact with (…)?.” A person answers with a 1-7 rating scale where “1” is very difficult and “7” is very easy.
This metric is essential for IT products, e-commerce, and service companies, as it directly affects the outflow of customers. Often used in conjunction with CSAT.
CES formula and interpretations
CES = (Number of ratings 7-5) / (total scores) * 100%
The higher the CES, the better the customer retention and overall loyalty to a company (NPS). According to a study by the Harvard Business Review, with a high CES – 90% of customers tend to re-interact with business. In addition, Gartner’s research indicates that in companies with a high rate of ease of achieving a goal, NPS is, on average, 65% higher than those where the process is complex.
Churn rate – is a key indicator that estimates how many customers stopped doing business with a company in a given period of time.
Churn Rate formula and interpretations
Churn = (Number of customers at the beginning – Number of customers at the end of the period) / (Number of customers at the beginning) * 100%
A high outflow indicates possible problems with the service, product, or just a fact that many non-target customers are involved in the funnel.
Churn Rate is recommended to evaluate together with RFM analysis, which allows you to segment the customer base by the number of purchases, frequency of purchases, and value in cash.
Retention rate is the percentage of customers a business retains over a given period of time.
Retention Rate formula and interpretations
Retention=Number of customers at the beginning – Number of customers at the end of the period) / (Number of customers at the beginning) * 100%
The high level of the indicator indicates the propensity of customers to repurchase, satisfaction with the experience, and, as a result – an increase in the lifetime value of the client Lifetime Value (LTV).
It is important to remember that customer experience evaluation is not static and can easily change after the first negative case. The assessment may also be influenced by comparisons with alternative experiences in meeting their needs (e.g., classic taxi service and “Uber”). If the latest was the best, then your service automatically loses points.
Therefore, our recommendation is to create a company process of regular monitoring of the level of satisfaction with the experience, which will allow you to be responsive to changes and not lose customers.
If you need support to build a loyalty assessment process inside your organization, feel free to contact our Team.